Free factsheet: EIS at a glance

Seed Enterprise Investment Scheme

SEIS in a nutshell

Help start-up companies get off the ground and for every £1 you invest, save up to 64p in income and capital gains tax. You also qualify for IHT exemption, potentially saving up to another 40p per £1 you invest.

Offer now closed (7 December 2018)

Global population is set to reach 9.8 billion by 2050. Meanwhile, food resources are depleting. If the current trend continues, within 25 years the UK could have to import over half of our food.

Hydroponics, a method of growing plants without soil, could help bridge the gap between supply and demand. Indeed, the hydroponics market is forecast to grow 16% a year.

The Sterling Suffolk Hydroponics EIS aims to exploit this opportunity. It is raising £5 million to help fund the construction and operations of an 8-hectare glasshouse that will produce tomatoes hydroponically.

The construction of the glasshouse is well underway and scheduled to be completed by 31 December 2018. The first crop should be planted shortly afterwards. SSL is on track to deliver its forecast £4.5 million sales in 2019, although this is not guaranteed. The images below show the progress as at November 2018.

Highlights

EIS opportunity to grow tomatoes hydroponically in a market forecast to grow 16% a year

Highly experienced management team and counterparties

5-year rolling supply agreement with Suncrop Produce Limited

Target EIS raise £5 million in first round with £2 million already secured

Minimum normally £100,000 but can be reduced to £10,000 for Wealth Club members by special agreement

Supported by an established institutional investor

Glasshouse construction underway and project ahead of schedule

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

The offer

Sterling Suffolk Limited (“SSL” or the “Company”) has been set up by a highly experienced management team to exploit the potential of hydroponics and capitalise on the growing demand for British produce and alternative farming.

SSL is constructing an eight-hectare glasshouse (an area equivalent to 12 international football pitches) to grow premium tomatoes on its leasehold site near Ipswich, Suffolk.

The project is expected to require over £22 million of funding overall. An established and well respected institutional investor is providing a debt facility of £15 million and the remaining £7 million is expected to be raised through successive rounds of EIS funding.

In this initial round, SSL aims to raise £5 million under EIS. £2 million has already been raised. The round will close when the target is reached. Shares are being allotted periodically, with the last allotment date being 7 December 2018.

The construction of the glasshouse is underway: the steel frame is up and the contractors are starting to install glazing bars around the perimeter walls. Overall the project is ahead of schedule and should be completed four weeks ahead of the original completion date, without the payment dates being moved forward.

Watch a video interview with David Scrivens of investment manager Amberside Capital:

The opportunity

Every day the world population grows by 200,000 people. All of them need feeding. By 2030, farmland per capita is likely to decrease from 2,200m² to 1800m².

Hydroponics could help bridge this gap between demand and supply.

It is an established method of growing plants in sand, gravel or liquid, using mineral nutrient solutions but without soil. Using hydroponics has both environmental and health benefits.

By eliminating soil there are no soil-borne pests or disease, so fewer pesticides are required compared to traditional farming. This, in turn, helps reduce soil erosion as well as air and water pollution.

Crops can be grown virtually anywhere, lowering transport emissions and providing consumers with fresher goods. Food currently travels an average of 1,500 miles before reaching our plates.

Moreover, as the plant receives optimum nutrition throughout its growth, the resulting crops have superior taste and higher nutrients.

The global hydroponics market is anticipated to grow to US $724.87 million by 2023. Improved yields, higher return on investment, and protected environment among others, are helping attract producers as well as investors.

Europe is the fastest-growing region, forecast to grow 16% a year, with the Netherlands and Spain leading the way. In the UK, the market is still developing and is currently quite fragmented.

Target returns

This is projected to be a highly cash generative and profitable operation with profits of over £1.7 million on turnover of £8.5 million by year 5. It targets returns of 2.2x after tax relief and 1.5x before tax relief for EIS investors. Please note returns are not guaranteed.

The site has been prepared and the glasshouse is under construction with the first phase expected to complete at the end of the year.

Once the first phase is completed there will be 5.6 hectares of operational glasshouse to start producing crops and generating revenue, whilst construction is completed on the remaining 2.7 hectares. The final phase, with the remaining 2.7 hectares, is expected to complete in December 2019.

It’s worth noting SSL also has planning consent to construct a further 8-hectare glasshouse in the neighbouring field. This could provide an opportunity to scale up and achieve further operational efficiencies. This would be subject to a separate investment round and has not been included in the projections or target returns.

Exit strategy

As with all EIS companies, there is the option of a sale to trade or another investor, refinancing or a stock market listing.

Risks – important

This, like all
investments available through Wealth Club, is only for experienced investors
happy to make their own investment decisions without advice.

EIS / SEIS
investments are high-risk so should only form part of a balanced portfolio and you
should not invest money you cannot afford to lose. They also tend to be
illiquid and hard to sell and value. Before you invest, please carefully read
the Risks and
Commitments and the offer documents to ensure you fully
understand the risks.

Tax rules can
change and benefits depend on circumstances.

This is a single
company EIS offer with no diversification. It involves investing in an early-stage
business which is by nature high risk and prone to failure.

Our view

In our opinion this is a quality opportunity to invest in a project in a growing UK market, although you should form your own view. It offers experienced investors the potential of good returns and EIS tax relief while providing a benefit to the UK agriculture and the environment as a whole.

Hydroponics is an established method of food production and is growing fast in Europe. The management team and counterparties are highly experienced and incentivised and are investing significant capital themselves.

The project requires sizeable capital outlay, but the 5-year supply agreement with Suncrop provides some visibility of earnings. Should the team be successful in extending the glasshouse facilities and scale up the operation, it could achieve a higher exit value – not guaranteed and not included in the return forecasts.

Wealth Club aims to make it easier for
experienced investors to find information on – and apply for
– tax-efficient investments. You should base your investment decision on the
provider's documents and ensure you have read and fully understand them before
investing. This review is a marketing communication. It is not advice or a
personal or research recommendation to buy the investment mentioned. It does
not satisfy legal requirements promoting investment research independence and
is thus not subject to prohibitions on dealing ahead of its dissemination.

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